Germany sets out measures to tackle affordable housing shortage

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BERLIN (Reuters) - German Chancellor Angela Merkel’s government set out a raft of measures on Friday to try to speed up the construction of housing and limit rent rises as it seeks to tackle a drastic shortage of affordable housing.

The shortage presents a political problem for Merkel’s ruling coalition and makes it easier for far right politicians to argue that an influx of migrants starting in 2015 has made life harder for ordinary Germans.

For decades, Germans enjoyed comparably cheap housing. But ultra-low interest rates, foreign investment and a failure to build enough flats to keep pace with an influx of people to big cities have pushed up house prices and rents in recent years.

German home prices have risen by 60 percent since 2010, says Fitch Ratings, while rents in Berlin have more than doubled since 2008, according to a recent study by online housing portal immowelt.de.

In Munich, the most expensive city in Germany, renters now pay on average 61 percent more than 10 years’ ago.

As Germans struggle to keep up with rent increases, Merkel’s conservative bloc and its junior coalition partner, the Social Democrats (SPD), have made tackling the shortage of affordable housing a priority.

Merkel told the news conference that the so-called “housing summit” had mad a start at addressing how to solve the question of how to build more houses and apartments in the right place.

The government aims to build 1.5 million new flats by 2021. It has set aside over 5 billion euros for social housing and said on Friday it plans to build over 100,000 new social flats by 2021.

It has already approved a bill to strengthen curbs on rent increases in big cities, and backed new tax incentives to encourage private developers to build new rental flats.

Other measures put forward in a draft bill on Friday include raising housing allowance for poor households and overhauling building regulations to make it easier to build more quickly.

The government will also give its own land to municipalities at a subsidized rate so they can build affordable housing.

The German Economic Institute in Cologne forecasts that Germany needs to build around 380,000 new apartments each year until 2020 to keep up with demand.

Affordable housing has become a pressing social issue. In April, more than 10,000 people marched through the streets of Berlin to protest against rising rents, while the topic has been a campaign issue ahead of Bavaria’s state election next month.

“Increasing prosperity in Germany is being eaten up by increasing rents people have to pay,” said Tobias Hans, premier of the German state of Saarland.